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R&D investment in the UK continues to increase.

11 Aug 2023

Daniel Rathbone

Deputy Executive Director

The Office for National Statistics (ONS) have published the latest figures for R&D expenditure in the UK in 2021 (GERD). I take a look at what they mean for R&D in the UK and project ahead to 2024/25.

GERD 2021

The latest Gross Expenditure on R&D (GERD) release shows that in 2021 the UK invested £66.2bn in R&D. This continues the trend of increases in recent years, with £61.8bn having been invested in 2020. In 2021 the investment was split between £18.5bn from the public sector and £47.7bn from the private sector. It’s great news that R&D investment is continuing to increase, and does not appear to have been significantly affected by the pandemic.

The amount invested by Government, UKRI and Higher Education research councils, which broadly aligns with the Government’s science budget, was £12.8bn in 2021, an increase from £12.1bn in 2020. However, the budget for R&D for the FY 2021/22, announced at the spending review in 2021, was £14.8bn. While some of this difference will be explained by the ONS data being for calendar years and the budget is for the fiscal year, that is unlikely to explain such a large difference. Much of the difference is likely explained by the UK not associating to Horizon Europe, for which £1.3bn had been set aside for that year. Most of this money was later surrendered back to the Treasury. And despite assurances from the Government, this money has not yet been recommitted to R&D. So while the picture for R&D in the UK is good, and continues to increase, it could have been better.

Last year the ONS have made significant changes to the methodology used to estimate R&D performed by businesses and the higher education sector. As a result of using the revised methodology the ONS found that there is substantially more R&D in the UK economy than previously captured by official statistics. The revisions only backdated the new methodology to 2018, meaning longer term comparisons are no longer possible.

Looking ahead

If the Government keeps its promise to invest £20bn in R&D in 2024/25, and no more money earmarked for R&D is returned to the Treasury, we project that the the UK will reach 3% of GDP invested in R&D in 2024/25*. If achieved, this would be a milestone moment for the UK and its ambitions to become a more research intensive country. However, we should not stop there. Research and Innovation will continue to be critical to solving the problems we face as a society and securing a more productive and prosperous economy. A stable and predictable plan, supported by sustained investment, is vital to help research and innovation thrive in a way to drive economic growth and prosperity across the UK. CaSE will be pushing all political parties to commit to this in the run-up to the next General Election.

*Projection Assumptions

Public spend is £20bn by 2024/25 (government commitment)

Private spend in R&D increases in line with GDP (using OBR forecast March 2023) and includes an economic leverage ratio of £1 of public spend yielding £2 of private spend over a ten-year period (from 2020 BEIS paper)

HE spend on R&D stays constant at £5.2bn (was broadly constant 2018-2021)

UK GDP growth taken from OBR forecasts (March 2023)